Russia halts stock trading amid emerging-markets rout
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Bad as things are on Wall Street today -- and they’re very bad -- ‘be glad you’re not in Russia,’ as my grandmother used to say.
Bloomberg News reports from Moscow:
‘Russia poured $44 billion into its three largest banks and halted stock trading for a second day in a bid to stem the most severe financial crisis since its devaluation and debt default a decade ago. The cost of lending has soared to a record, with the MosPrime overnight rate reaching 11.1%. The Finance Ministry extended the repayment period on loans available to OAO Sberbank, VTB Group and OAO Gazprombank to three months from one week.’
The Micex share index in Moscow, which plunged 17.4% in an abbreviated session Tuesday, was down 3.1% today when trading was halted again.
The index is down 55% year to date, compared with the 20% drop in the U.S. Dow Jones industrial average.
Money has been fleeing emerging markets overall in recent months as global investors have feared that those economies would begin to stumble badly as growth ebbs in Europe, Japan and the U.S.
The summer plunge in commodity prices also has had a depressive effect on emerging markets because many are big exporters of raw materials, of course.
But this sell-off also is simply a case of many investors trying to reap some of the huge gains they’ve racked up in recent years, before those paper profits evaporate altogether. The Micex index rose every year from 2002 through 2007, surging 492% in the period, as Russia’s economy boomed. The index now is back to where it was in November 2005.
Warnings to global investors about the inherent volatility of emerging markets fell on deaf ears as long as the party continued.
Among other major emerging markets, Brazil’s main share index was down 6.7% today and is off 28% year to date, Hong Kong was down 3.6% for the day and is off 36% this year, and India fell 1.9% for the day and is down 35% for the year.
The iShares Emerging Markets Index exchange-traded fund closed at $31.55 a share today, down 7.1% from Tuesday and down 37% year to date.